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Feds say tribe should lose $3.9 million in flood aid

HELENA – U.S. government auditors are expanding their review of federal disaster aid mismanagement by the Chippewa Cree Tribe after finding fraud, waste and abuse in a project to demolish the Montana tribe's health clinic.

The tribe's clinic was destroyed when more than 5 inches of rain fell in June 2010, flooding nearly all of the reservation. The damage prompted a presidential disaster declaration, opening the door for federal disaster aid.

The Department of Homeland Security's Inspector General's Office recommended the Federal Emergency Management Agency deny the tribe's $3.9 million claim for the clinic's demolition, and the auditors now plan to examine all $31.6 million FEMA awarded the tribe after the flooding.

The auditors also recommended that FEMA label the Chippewa Cree as a high-risk grantee, meaning the tribe would be subject to strict conditions for future disaster aid.

The recommendations came in a report released this month detailing the findings of the health-center demolition project audit, which was prompted when the tribe was unable to provide documentation to support $3.9 million in claims on a project FEMA estimated would cost $3.4 million.

The Office of Inspector General report concludes the tribe failed to use an open bidding process to award the demolition contracts, failed to submit required quarterly progress reports, could not supply detailed information on vouchers and invoices submitted for payment, and allowed the use of federal disaster assistance funds for non-disaster related work.

In one instance, OIG investigators uncovered nearly $105,000 in work vouchers and fuel tickets submitted for payment to FEMA that were in fact used for work on a new tribal detention facility funded by the Department of Justice.

FEMA has 90 days to respond to OIG's recommendations. FEMA spokesman Jerry DeFelice said the agency was aware of the audit, but because of their future legal implications would not be willing to comment on the OIG's recommendations.

The tribe's governing Chippewa Cree Business Committee placed the blame on former state Rep. Tony Belcourt, who was convicted of corruption charges last year as the head of the tribe's main contractor, the Chippewa Cree Construction Corp.

"The Tribe and its members may now have to incur the costs of the demolition," interim chairman Ted Whitford said in a statement. "This is a very unfortunate situation, and the current Business Committee is deeply disappointed and angered by the actions of Mr. Belcourt and others who worked in concert to defraud the Tribe."

Belcourt was elected as CEO of the Chippewa Cree Construction Corp. in 2005, and served as the tribe's emergency incident commander at the time of the June 2010 floods. The OIG audit found that as head of the CCCC, Belcourt "empowered himself with sole authority to award contracts without competition, issue disaster-related work orders without contracts, approve work orders and invoices, issue and cash checks, and request drawdowns of FEMA grant funds."

Belcourt was subsequently convicted on federal corruption charges for embezzling the tribe's insurance proceeds and FEMA grant funds. He pleaded guilty in a deal with prosecutors to theft, bribery and tax-evasion charges and was sentenced in August to 71/2 years in prison. Seventeen other tribal officials, contractors and consultants have been convicted in the wide-ranging federal corruption investigation into that and other federally funded projects on the reservation

However, the OIG audit did not place full responsibility for the FEMA funded debacle on Belcourt's shoulders alone. The audit found the tribe had poor accounting controls and procedures, which Belcourt exploited to embezzle money, and that in its role as owner of the Chippewa Cree Construction Corp., the tribe "neglected to administer and monitor day-to-day grant activities" and "neglected to identify the material deficiencies in the Corporation's fiscal controls."

"Evidence indicates that these significant grant management problems may have also negatively affected the tribe's other projects, especially considering that the tribe used the same contractor," the audit report read.

If fully implemented, the OIG recommendations would bar the Chippewa Cree Tribe from receiving FEMA payments in advance of authorized projects, would withhold authorization to proceed onto the next phase of any project before FEMA received evidence of acceptable performance, and would require detailed financial reports, additional project monitoring and technical or management assistance.

Other funding affected by the expanded review includes $15.6 million approved for a new health clinic. That project was halted because of cost overruns and is expected to require more than $40 million to complete, according to the audit.

Whitford was unavailable for an interview Monday but told The Associated Press in a statement emailed by his public-relations firm that the tribe had hoped to use the $3.9 million from FEMA to help finish the new clinic.